Are landlords able to offset expenses (travel, meals, accommodation etc) when searching for additional properties to buy to rent out? Also, are any costs resulting from abortive purchase allowable? Many thanks.
Replies (6)
Please login or register to join the discussion.
I would say yes
If they are already trading as a property business renting out several properties then I would see any such expenses being incurred wholly and exclusively for the purpose of trade, with the usual restrictions on travel, accommodation and subsistence, unless anyone has specific knowledge of such claims being denied before.
Is there not an argument
If they are already trading as a property business renting out several properties then I would see any such expenses being incurred wholly and exclusively for the purpose of trade, with the usual restrictions on travel, accommodation and subsistence, unless anyone has specific knowledge of such claims being denied before.
Is there not an argument that these are expenses connected with purchasing a capital asset so relief is only against later sale for CGT purposes as part of the acquisition costs, but re the abortive purchase expenses no relief as no asset to sell?
No. They are incidental costs of acquiring capital assets, whether the purchase of the capital asset takes place or not.
You might argue some of them are within Camas, but HMRC will take issue with that argument, and so the costs would need to be worth taking it to tribunal and probably onwards.
EDIT: Crossed with DJKL, with whom I agree.
I suppose so
I wouldn't have considered including the travelling expenses as capital but I suppose you have a point there. I wouldn't be inclined to include them though as they are not necessarily tied to the purchase of a specific asset but rather the general activity of hunting for more appropriate properties which may lead to no purchases or multiple purchases. I think I'd still include them as trading expenses but that's just an opinion.
As for the legal fees, again you may have a point but it seems unreasonable that the expense is treated as capital when there is no capital asset resulting from it. Of course it would be capitalised with the purchase price were the sale to go through but if it falls through it seems unfair that it would just be money down a hole that no relief was available for.
edit: crossed replies with Portia there, I expect she's probably right, she usually is
Over the years
I wouldn't have considered including the travelling expenses as capital but I suppose you have a point there. I wouldn't be inclined to include them though as they are not necessarily tied to the purchase of a specific asset but rather the general activity of hunting for more appropriate properties which may lead to no purchases or multiple purchases. I think I'd still include them as trading expenses but that's just an opinion.
As for the legal fees, again you may have a point but it seems unreasonable that the expense is treated as capital when there is no capital asset resulting from it. Of course it would be capitalised with the purchase price were the sale to go through but if it falls through it seems unfair that it would just be money down a hole that no relief was available for.
edit: crossed replies with Portia there, I expect she's probably right, she usually is
Over the years we have had a few abortive transactions and every time I have to disallow the costs it feels somehow unfair, but such is life.
What of course seems worse is when you are selling a property (not from stock), incur costs re the sale and it then falls through, that is the double whammy as you had the anticipation of the profi dashed ( hopefully selling at a profit) and to rub salt in the wound you now have the bill to pay. I had one about four years ago that was a great price, went to the 11th hour, legals had been rolling for about three months, agent sharpening his pencil in anticipation of drafting his fee note re the sale and the buyer walked; whilst our solicitors tend to limit their fees in such circumstances it is still a bitter pill to swallow.